Product Market Combinations for small farmers in Indonesia ... · Downstream in the supply chain PT Alamanda already had contacts with some major supermarket chains in Singapore who

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vegIMPACT report 19. Product Market Combination Hot Pepper

vegIMPACT Report 18

March, 2015

vegIMPACT Report 2

March 2014

Occupational Pesticide Exposure in Agriculture

A literature and policy review

Edwin van der Maden, Melliza Wulansari and Irene Koomen

Product Market Combinations for small farmers in Indonesia:

Hot pepper with low pesticide residues for the Singapore market

Marijn van der Laan, Marcel Stallen, Novianto

vegIMPACT Report 19

January, 2016

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vegIMPACT is a program financed by The Netherlands’ Government promoting improved vegetable production and marketing for small farmers in Indonesia, contributing to the food security status and private sector development in Indonesia. The program builds on the results of previous joint Indonesian-Dutch horticultural development cooperation projects and aligns with recent developments in the horticultural private sector and retail in Indonesia. The program activities (2012 – 2016) include the Development of Product Market Combinations, Strengthening the Potato Sector, Development of permanent Vegetable Production Systems, Knowledge Transfer and Occupational Health.

Wageningen University and Research centre (Wageningen UR, The Netherlands):

- Applied Plant Research (APR), AGV Research Unit Lelystad - Centre for Development Innovation (CDI), Wageningen - Plant Research International (PRI), Wageningen - Agricultural Economics Institute (LEI), Den Haag

Contact person:

Huib Hengsdijk, [email protected]

Indonesian Vegetable Research Institute (IVEGRI, Indonesia)

Contact person:

Witono Adigoya, [email protected]

Fresh Dynamics (Indonesia)

Contact person:

Marcel Stallen, [email protected]

www.vegIMPACT.com

© 2015 Wageningen, Stichting Dienst Landbouwkundig Onderzoek, Research Institute

Praktijkonderzoek Plant & Omgeving/Plant Research International, P.O. Box 16, 6700 AA

Wageningen, The Netherlands; T +31 (0)317 48 07 00; www.wageningenur.nl/en/Expertise-

Services/Research-Institutes/applied-plant-research.htm

Stichting Dienst Landbouwkundig Onderzoek (DLO Foundation). All rights reserved. No part of this

publication may be reproduced, stored in an automated database, or transmitted, in any form or by

any means, whether electronically, mechanically, through photocopying, recording or otherwise,

without the prior written consent of the DLO Foundation.

DLO is not liable for any adverse consequences resulting from the use of data from this publication.

mailto:[email protected]



http://www.vegimpact.com/

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the dates business is doing fine

Product Market Combinations for small farmers in Indonesia:

Hot pepper with low pesticide residues for the Singapore market

Marijn van der Laan, Marcel Stallen, Novianto (PT Fresh Dynamics Indonesia)

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Contents

Abbreviations and Acronyms ........................................................................................................................... 5

1 Introduction ............................................................................................................................................. 6

1.1 Product Market Combinations .......................................................................................................... 6

1.2 Hot pepper - the market demand ..................................................................................................... 6

1.3 PMC hot pepper - the business proposition ...................................................................................... 7

2 Product Market Combination Hot Pepper: participants, approach and interventions .............................. 9

2.1 PMC participants .............................................................................................................................. 9 2.1.1 Farmers ....................................................................................................................................... 9 2.1.2 Trader / exporter / packhouse ...................................................................................................... 9 2.1.3 Retailers .................................................................................................................................... 10

2.2 PMC activities and interventions .................................................................................................... 10 2.2.1 Agronomic interventions ............................................................................................................ 10 2.2.2 Organizational interventions ...................................................................................................... 11 2.2.3 Marketing and sales interventions .............................................................................................. 12

3 Results and discussion ........................................................................................................................... 13

3.1 Agronomy ...................................................................................................................................... 13 3.1.1 Pre - PMC situation, location and agricultral practices ................................................................ 13 3.1.2 Agronomy training and results ................................................................................................... 14 3.1.3 Pesticide residue levels .............................................................................................................. 14 3.1.4 Implementation of planting schedules and yields ....................................................................... 15 3.1.5 Post-Harvest and logistics .......................................................................................................... 16

3.2 Group formation and development ................................................................................................ 16

3.3 Marketing and sales ....................................................................................................................... 16

4 Conclusions ............................................................................................................................................ 18

4.1 Business proposition PMC hot pepper ............................................................................................ 18

4.2 PMC contribution to vegIMPACT objectives .................................................................................... 19

4.3 Sustainability.................................................................................................................................. 20

Annex 1. Introduction Indonesian vegetables exports to Singapore ............................................................. 21

Annex 2. Planting schedule hot pepper Guci, 2013 – 2014 ........................................................................... 23

Annex 3. Break down planned product flows, planting shedules and yields ................................................. 24

Annex 4 Three years’ development path of farmer group ............................................................................ 26

Annex 5. Key performance data PMC hot pepper ........................................................................................ 27

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Abbreviations and Acronyms

APR (PPO) Applied Plant Research of Wageningen University and Research Centre

ASEAN Association of Southeast Asian Nations

AVA Agri-food & Veterinary Authority of Singapore

BPS Badan Pusat Statistik, the Indonesian Central Agency on Statistics

CDI Centre for Development Innovation of Wageningen University and Research Centre

DIPERTA Dinas Pertanian Daerah

FAO Food and Agriculture Organization of the United Nations

FDA Fresh Dynamics Asia

IDR Indonesian Rupiah (currency; 1 Euro = 15,000 IDR; July 2014)

IPM Integrated Pest (and disease) Management

IVEGRI Indonesian Vegetable and Research Institute

LEI Agricultural Economics Institute of Wageningen University and Research Centre

M&E Monitoring and Evaluation

MRL Maximum Residue Level

MoU Memorandum of Understanding

PMC Product Market Combination

PRI Plant Research International of Wageningen University and Research Centre

WHO World Health Organization

WP Work Package

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1 Introduction

1.1 Product Market Combinations

Within the vegIMPACT program, a Product Market Combination (PMC) is a pilot implemented with partners in the supply chain, including small farmers (< 2 hectare), who produce vegetables in a coordinated way and according to specific market demands. A PMC contains innovative aspects, for example the use of improved varieties, a new marketing concept, packaging materials, branding of the vegetables or the supply chain configuration itself. In a PMC supply chain partners make arrangements among themselves with regard to improving existing market linkages or to create new market opportunities. PMC’s are considered as a “proof of concept“ to show that innovations and cooperation in market-oriented supply chains potentially can benefit all supply chain partners and in particular small farmers.

National and international vegIMPACT PMC staff facilitate this process from carrying out initial market surveys; developing business propositions in collaboration with supply chain partners; facilitating the implementation of the supply chain until the marketing of the product1.

Farmers and supply chain partners in a PMC are supported by vegIMPACT project staff to improve critical issues in their supply chain such as agronomy aspects, post-harvest issues, organizational weaknesses and marketing. To this end a pre-project (training) needs assessment and supply chain analysis are conducted by vegIMPACT staff and interventions for improvement proposed.

Product Market Combinations are assumed to contribute to the following vegIMPACT objectives: increased vegetable productivity; reduced pesticide use per unit product; reduced production costs per unit product; increased financial margins for farmers and reduced occupational health problems and risks. In this report the approach, facilitation process and results of the “PMC hot pepper” are described and the impact on the relevant vegIMPACT objectives assessed.

In Chapter 1 an overview of the markets for hot pepper in Indonesia and neighbouring countries (mostly Singapore) are summarized as well as the business opportunity that this PMC hot pepper wants to capture.

In Chapter 2 the characteristics of the PMC hot pepper, the supply chain actors and other stakeholders are presented and the arrangements between partners and the market proposition (the PMC interventions) are described. Agronomical practices and the hot pepper cropping system are described as far as relevant for the performance of the supply chain.

In Chapter 3 the results of the PMC hot pepper are presented and discussed, including hot pepper agronomical aspects such as yield, quality and results of residue testing of the hot pepper, production planning and farmers’ financial results.

In Chapter 4 conclusions are formulated and follow-up actions are described to assure continuity of the PMC.

1.2 Hot pepper - the market demand

Hot pepper is one of the most important horticulture crops in Indonesia and is on the daily diet of most Indonesians. Hot pepper is grown in many regions of Indonesia, under highland as well as under lowland production conditions. Hot pepper production in Indonesia has more than doubled in the last 15 years (Fig. 1). However, due to low production efficiency and planning, in combination with a

1 Participants in a PMCs can produce for traditional and modern street or wholesale markets, high end modern retail, mini markets and other retail markets, export markets as well as for the processing market

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fast growing Indonesian population, the demand for pepper in Indonesia grows faster than the domestic production. As a result Indonesia occasionally imports chilies and peppers from China and Malaysia (Fig. 1).

During certain periods of the year the Government of Indonesia encourages and facilitates traders to import peppers in order to reduce and stabilize consumers’ prices at the Indonesian market. Oddly enough the government also stimulates some vegetable traders to export vegetables, including hot pepper, in order to promote Indonesian products in the region.

The supply of hot pepper for the Indonesian market is irregular and trade is dominated by a small group of traders. These factors contribute to sharply fluctuating hot pepper consumer prices.

Figure 1. On the left, the total production of hot pepper in Indonesia (period 1997 – 2013, BPS) and on the right the import of chillies and pepper in Indonesia (period 2002 – 2011, FAOSTAT).

Typically, Indonesian farmers start growing pepper if prices are high, resulting in low prices 3-4 months later at the time of harvesting due to an abundant supply.

In the hot pepper sector in Indonesia the following market and supply chain actors can be identified: farmers, farmer groups, collectors, traders, retail/processors and consumers.

Most of the traders that were interviewed by the vegIMPACT PMC team during the preparatory phase, clarified that they were only modestly interested in contracting farmer groups in case of hot pepper. Main reasons were the volatile and fluctuating market prices and their experiences of poor farmers’ commitment to contracts. Furthermore, traders and exporters indicated that hot peppers from Indonesia have a reputation of exceeding Maximum Residue Levels (MRLs) because farmers apply high doses of (sometimes non-registered) pesticides.

Food processors, such as Indofood and ABC-Heinz, are also in need of large quantities of hot pepper and these multi-national companies source from preferred traders. These traders try to contract farmer groups to somehow stabilize sourcing prices, but often contract farmers sell their produce at the open market when prices are high (‘side selling’), rather than adhering to the – mostly informal - contract agreements. Recently, food processors started to import hot pepper from China, - though still in small quantities - to ensure sufficient hot pepper supply at fixed prices.

1.3 PMC hot pepper - the business proposition

A business proposition for hot pepper was formulated in close cooperation with Alamanda, a trader from Bandung (PT Alamanda Sejati Utama), who was interested and willing to participate in the PMC hot pepper project. PT Alamanda had collaborated with the proposed farmer group in Guci, Tegal (kelompoktani Mitra Usaha Tani).

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Downstream in the supply chain PT Alamanda already had contacts with some major supermarket chains in Singapore who were interested in high quality and safe (with low pesticide residues) hot pepper, produced in Indonesia. See Annex 1 for an introduction of Indonesian vegetables on the Singaporean market.

The following business proposition for hot pepper was formulated: “Production of a continuous supply of premium quality hot pepper (red and green) produced in Central Java, for export to Singapore retail market. These hot peppers should be produced with a minimum amount of pesticides and compliant with international threshold level for pesticides and sold at pre-established contract prices”.

For the purpose of this PMC, farmers and trader agreed on a contract price of 12,000 IDR /kg for red pepper and 10,000 IDR /kg for green pepper, with mutually agreed and well-defined quality specifications (Fig. 2). The contract volume was fixed on a continuous supply of 500 kg green peppers and 1,000 kg red pepper per week.

Quality specifications PMC hot pepper:

Length : 12 – 15 cm

Colour : full red or full green

Form : relatively straight shape

Surface : flawless, clean, shiny, no cracking or damage

Fruit stalk : still attached, green

MRL : Below Singapore MRL standards

Figure 2. Contract quality specifications of hot pepper.

Table 1 shows the expected benefits of the participating farmers and the trader in PMC hot pepper.

Participants Expected benefits

Farmers Higher hot pepper yields per hectare and lower cost price

Based on contract volume: profits margins of up to IDR 70 million per hectare per planting cycle2.

Guaranteed stable weekly gross income.

Alternative soft loan options via trader

More professional functioning farmer group.

Pre-grading at farm side would give farmers more control on quality.

Trader Guaranteed weekly supply of hot pepper.

Reliable, free of pesticide residues and high quality peppers at fixed price.

Table 1. Expected benefits of PMC business proposition for farmers and trader.

2 In this report the term “gross income” is used for the received payments from the trader. This amount should include a reasonable profit margin (income per hectare minus cost price of growing peppers per hectare) for the farmer in order to let the PMC sustain. One planting cycle consists of a period of 10 months.

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2 Product Market Combination Hot Pepper: partners, approach and interventions

2.1 PMC partners

Figure 3 shows an overview of the partners in the proposed supply chain of PMC hot pepper.

Figure 3. Supply chain and partners PMC hot pepper.

2.1.1 Farmers

The farmer group (kelompoktani Mitra Usaha Tani) consisted of 20 farmers that were loosely organized in a kelompoktani3. The farmers did not meet each other regularly and only occasionally farmers shared experiences in an informal way. The farmers were from two kecamatan’s (kecamatan Bojong and Bumi Jaya) and the age of the farmers was between 25 and 65 years. Their level of education varied from Primary school to University Degree.

Mitra Usaha Tani cultivated about 50 ha of land with various types of vegetables, 10 ha was cultivated by the farm leader. Most of the land was owned by the farmers themselves and not rented. The (training) needs assessment of the farm group revealed that the group was in need of all aspects of cultivation knowledge. Although all farmers had cultivated pepper for a long time, they hardly ever received specific training on the cultivation of pepper. Farmers’ knowledge was transferred from generation to generation and most of the training they received recently was by field staff of pesticides companies. Farmers’ knowledge was assessed as “basic” by vegIMPACT PMC staff. A tailor-made training plan was developed for the farmer group to increase the practical know-how and expertise and to support the organization of the group (section 2.3.)

2.1.2 Trader / exporter / packhouse

PT. Alamanda Sejati Utama, established in Jakarta in 2002, is a private Indonesian company engaged in trade (buying, sales and export) of vegetables, fruits, and flowers, which are mostly exported to Singapore. The company manages the entire chain from the farm, product handling, packaging, until delivery to the client in order to maintain high quality standards. The company has its own cold storage facilities with a capacity of over 300 MT in Bandung (West Java). Recently, the company opened another warehouse in Tegal, Central Java, to handle increased export volumes.

Alamanda provides many types of packaging, depending on customers’ demand and product requirements. Although Alamanda’s has refrigerated trucks to ensure temperature and quality

3 Many kelompoktani were established in the 1980’s, because farmers had to be organized in groups to qualify for Government support from the local Dinas Pertanian Daerah (public extension service). Most kelompoktani only exist on paper nowadays and they are not very active.

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controlled logistics from the pack house to the client, the transport from farmers’ fields to pack house is arranged with non-refrigerated trucks.

The company has long term supply arrangements with buyers in Singapore, such as NTUC Fair Price, one of the biggest modern supermarket chains in Singapore, Cold Storage, Shop ‘n Save and Giant. Alamanda also exports Indonesian fruits and vegetables to Malaysia, Thailand, Hong Kong, Brunei Darussalam, United Arab Emirates, Bangladesh, South Korea, Japan, and Pakistan. PT. Alamanda is a fast growing company with exports growing from around 5,000 tons fresh produce in 2010 to 10,400 tons in 2014.

2.1.3 Retailers

Supermarkets in Singapore buy directly from farmers as well as from traders. The hot peppers produced by the PMC farmers in Guci and traded by PT Alamanda were intended to be sold through various leading supermarkets in Singapore.

Figure 4.Red chillies, produced in Indonesia, sold under private label at the supermarket shelves in Singapore.

2.2 PMC activities and interventions

2.2.1 Agronomic interventions

Cultivation training and coaching activities

In order to supply hot pepper in accordance with the quality specifications as described in the business proposition and contract (section 1.3), farmers were trained on all cultivation aspects, including integrated pest and diseases management (IPM) and rational fertilizer application, in cooperation with IVEGRI (Indonesian Vegetable Research Institute). Much attention was giving to hands-on training in farmers’ fields, especially on the identification of pests and diseases and spraying techniques. Because compliance with MRL levels are of key importance for export peppers, much attention was given to coaching of farmers on reducing pesticide use and the selection of pesticides that meet the Agri-Food & Veterinary Authority of Singapore’s (AVA) market requirements.

VegIMPACT also facilitated pesticides’ residue (MRL) testing of hot pepper both at the start of the production season and at the end of the PMC pilot. Pesticides’ residue testing were conducted by certified laboratories in the Netherlands and in Indonesia for crosschecking the quality and reliability of results.

Planting schedule

To guarantee a continuous supply volume during the pilot PMC selling period of seven months, as stipulated in the contract, the farmers were coached in the implementation of a planting schedule, consisting of one planting round of 19 staggered planting cycles, started on weekly bases in January

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2014. This was expected to result in a continuous harvest period (selling period) of 6-7 months (Annex 2 for planting schedule). On the request of the trader, PT Alamanda, all farmers planted one and the same local hot pepper variety “Biola”, produced by PT Surya Mentari. The seed price was IDR 110,000 per sachet which contained 1,500 seeds (of which on average 80% germinated).

Post-Harvest and logistical interventions

vegIMPACT delivered a tailor-made harvest and post-harvest training to the farmers, based on the trader‘s (market) specifications. This training module was developed in close cooperation with the trader and his staff, in order to minimize the percentage rejected peppers. A set of posters with photos of quality defects and do’s and don’ts was developed by the PMC team to remind farmers continuously on the major quality issues.

2.2.2 Organizational interventions

The preparatory research for this PMC revealed that many contracts with small pepper farmers are unsuccessful as farmers seem unable to commit to contract specification regarding continuous supply, quality and price. Farmers have few skills to communicate as equal business partners with traders and collectors; hence often problems are “solved” simply by breaching contracts, resulting in negative perception on their mutual working relationship by farmers, trader and / or collector.

In the hot pepper PMC standardized contracts were developed that were signed by the farmer group leader on behalf of the kelompaktani, instead of individual farmers signing a contract with the trader.

After the initial assessment of the farmer group, conducted by an external specialist on farmer group development in close collaboration with the PMC team, the farmer group was ranked at the lowest level of the “farmer group maturity scale” (Fig. 5). The kelompoktani “Mitra Usaha Tani” was classified as “basic and in the pioneering stage” (phase 1). It was assumed that, without any organizational support, the farmers would not be able to effectively address the above described commitment and production problems, while implementing the PMC project plan.

During the initial assessment of the farmer group and its members PMC staff has taken stock of the critical group issues that should be addressed and improved through training to make the farmer group more successful in their business. Based on this assessment five training modules were developed and delivered by a (group capacity building) specialist in collaboration with the PMC team. Among others, the objectives of this organizational training were to improve the capability of farmers, bringing them to the next development level and to empower farmers in their negotiations with traders.

Figure 5. Farmer group maturity ladder and development phases.

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2.2.3 Marketing and sales interventions

Financial support farmers

As explained in the introduction, the trader in the pepper PMC project already worked with the farmer group before, in 2013. At that time PT Alamanda had helped the Guci farmer group to apply for and acquire a loan of 30 million per hectare from the BCA bank to cover operational costs and investments in plants, seed, netting materials and other inputs for the production of hot pepper. The BCA loan was released in two tranches: 50% at start of hot pepper cultivation and 50% after the first harvest. During last seasons’ contract between the Guci farmers and PT Alamanda problems emerged with payments of the pepper by Alamanda and, consequently the repayment of the BCA loan by farmers. As a result farmers and Alamanda had stopped cooperation for a while.

As the farmers would receive extensive organization training by vegIMPACT, Alamanda trusted the farmers would be better able to manage and commit to loans and other professional business commitments. Therefore, Alamanda agreed to support the farmers by providing them a soft loan to cover start-up costs (seed, fertilizer, pesticide) after the contract was signed. The money would be transferred centrally to the farm group and from there distributed to the individual farmers. It was agreed that the loan would be paid back in instalments through deductions by Alamanda from the payments for harvested products. The loan agreement, including pay back conditions of the loan, was arranged directly between trader and farmers without interference of the PMC team.

Marketing of hot pepper

Because the pepper was sold in packaging with labels as demanded by the retail partners of Alamanda in Singapore, there was no need for vegIMPACT to support supply chain partners with the development of packaging materials or labels. However, during the PMC assessment and development phase, Alamanda had expressed the ambition to also enter the domestic market with their products, including peppers. This would possibly offer an alternative market channel for the vegIMPACT PMC peppers, thus making the PMC business proposition more sustainable. Therefore vegIMPACT developed and delivered a one-day introductory training on strategic marketing and branding of fresh produce for the sales and marketing team of PT Alamanda in Bandung. This training also helped to commit the trader to the vegIMPACT program.

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3 Results and discussion

3.1 Agronomy

3.1.1 Pre - PMC situation, location and agricultral practices

It is common practice in Guci to grow pepper in a rotation schedule with a range of other vegetables such as cabbage, carrot and beans. Previously farmers have experimented with growing hot pepper in net houses as well as in plastic tunnels (greenhouses) made out of bamboo, but they faced market related problems, in particular fluctuating prices, and farmers abandoned this cultivation method. Farmers have never used staggered planting schedules within a group of farmers to facilitate a continuous production and market supply.

One of the farmer group members manages a small nursery, in which he raises a range of vegetable seedlings including hot pepper. The average period to produce a healthy pepper seedling from seed, ready for transplanting into the field, is 25-30 days. Not all farmers used these high quality seedlings from this nursery, because of the costs involved. Seedlings raised in the nursery would cost 100 IDR 4 per seedling, provided that the farmer himself provides the seed and 200 IDR /seedling if no seed is provided.

Normally the pepper plants are irrigated manually with a water dipper, and on average 2 litres per plant is supplied, twice a week. A standard pepper planting cycle lasts about 6-7 months in the field after transplanting. The first harvest is 110 – 120 days after planting and harvesting continues with 5 days interval during a harvest period of 80 – 90 days.

Most farmers prefer to start growing hot pepper at the end of the rainy season as pest and disease pressure is reduced during the subsequent dry season. Only when farmers have contracts and a continuous supply is required by the buyer, they take the risk of cultivation in the rainy season, however they are very hesitant to do so, because of risks of crop failure.

Before the start of the PMC farmers shared their concerns with PMC staff about low pepper yields in general and that yields have decreased gradually during previous years.

Members of kelompoktani Mitra Usaha Tani produce vegetables at Guci, near Tegal, at an altitude of about 1,200 m. The soil is of volcanic origin (Andosol) because of the nearby volcano (Gunung Slamet). Kabupaten Tegal has a distinct wet and dry season (Fig. 6). In general the weather in Guci is considerable cooler and wetter than in Tegal.

Figure 6. Average rainfall distribution and minimum-maximum temperature in Tegal (period 2003 - 2009).

4 1 EUR = 15,000 IDR (July 2014)

Rainfall (mm); RH (%)

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3.1.2 Agronomy training and results

The PMC training program focused on the introduction of good agricultural practices, especially on the rational application of pesticides and fertilizer. Four intensive training and coaching modules, including many practical exercises in the field, were organized in cooperation with an expert from IVEGRI. In Table 2 some qualitative observations on farmers’ practices on pesticides’ application before and after the PMC training are summarized.

Before PMC project After PMC project

Pesticide spraying as per calendar, 2-3 times per week

Pesticide spraying once a week, based on field observations

Mixing of up to three different pesticides in one spray tank

Only sprayings with one pesticide at a time

Spraying in the morning Spraying at the end of the afternoon

Spraying from top of the plants to the bottom Spraying from the bottom of the plants to the top

Selection of pesticides based on active ingredients

Selection of pesticides, based on mode of action and export market requirements

Table 2. Qualitative information on plant protection practices hot pepper, based on a discussion with six leading farmers of the PMC hot pepper farmer group, before and after participation in the PMC pilot project.

3.1.3 Pesticide residue levels

Previously, before PMC interventions, peppers sold to Alamanda were exported to Singapore without monitoring the type of pesticides that were used during cultivation and without residue checking. During PMC implementation it appeared that farmers regularly used a number of pesticides on hot pepper that were banned in Indonesia. To overcome these practices the PMC team in cooperation with IVEGRI provided the farmers a list of approved pesticides by the Agri-Food and Veterinary Authority of Singapore (AVA).

VegIMPACT also facilitated pesticide residue testing of the peppers at the beginning and at the end of the PMC pilot project. Both times peppers were tested as safe for export to Singapore and compliant with the AVA standards and regulations. All Guci farmers used a logbook for pesticide and other inputs registration and they keep records of the type of pesticides applied, the volume used and the date of application.

Pesticides Residue Testing in Indonesia

The vegIMPACT PMC team has collected samples of peppers of the participating farmers for chemical analysis at the beginning and at the end of the PMC project. Each sample was tested by a certified (ISO 17025 and beyond) laboratory in the Netherlands and in Indonesia.

The results of the pesticides residue testing from the Dutch and the Indonesian laboratory differed on a couple of chemicals. Residues of pesticides - above EU threshold levels - that were measured in the Netherlands (in duplicate) were not measured by the Indonesian laboratory.

When the vegIMPACT PMC team discussed these differences in results, it was admitted by Indonesian laboratory staff that for one chemical residue the company did not have the necessary chemicals to conduct a proper test and for another chemical the analytical equipment was not functioning. Laboratory staff has reported these problems as part of their internal quality management system, but the laboratory management urged them to report results (as NIL, no trace measured) anyway. This Indonesian laboratory was ISO 17025 certified and was nominated

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by the Indonesian government to conduct fresh produce import and export inspections.

By the end of the PMC project another certified Indonesian laboratory was selected for testing hot pepper samples, but again results regarding certain chemicals differed with the test results from the Netherlands, albeit minimally.

In general, testing on pesticide residues in Indonesia is very expensive (about twice the price as compared with the Netherlands) and only a very limited number and types of chemical residues can be measured and / or screened in Indonesia (500 chemical substances in the Netherlands as compared with about 50 chemicals in Indonesia).

As illustrated by the results of the PMC hot pepper tests, Indonesian results of MRL testing cannot always be trusted and this situation severely hampers the export development of fresh produce from Indonesia, which is one of the priority policy areas of the Government.

3.1.4 Implementation of planting schedules and yields

The PMC team has introduced and facilitated a staggered planting schedule (Annex 3) to enable a continuous and regular supply of hot pepper for the export market. The target was set at a supply of 500 kg of green pepper and 1,000 kg of red pepper per week. Unfortunately the weather was not very favourable and because of long dry spells and other adverse conditions the planned volumes per week were not achieved. Albeit at a lower weekly volume a continuous supply was achieved by the farmer group.

In general, the planting schedule was adhered to by the farmers during the dry season (April – October 2013). However during the transition period between the dry and the wet season (November 2013) there was some unrest and concern with the farmers as they had to plant and produce under unfavourable and risky weather circumstances. To overcome the unrest the vegIMPACT PMC team intensified coaching and supported the farmers during this period in order secure a continuous supply.

The production characteristics of the PMC planting schedule are shown in Table 3.

PMC key figures and production results Planned Actual

Total number of plants (all farmers) 136,500 93,500

Total planting area (ha) 10.24 9.42

Plants per hectare planted 13,330 12,027

Harvested plants per hectare 13,330 9,926

Total yield per plant (gram) 800 960

Marketable yield per plant (gram) 800 480

Marketable yield (kg/hectare)5 10,664 4,769

% grade A (of marketable products) 75% 65%

Table 3. Overview of production characteristics in the hot pepper PMC

Albeit on a smaller planting area than planned and using fewer plants per hectare, farmers followed a staggered planting schedule. Unfortunately about 25% of the plants died due to diseases and adverse weather conditions. And even though the total yield per plant was slightly more than was

5 Hot pepper yields of 16-20 ton/ha are feasible according local seed companies, while the Bank of Indonesia uses 10 ton/ha in calculations for financing new hot pepper projects. The Ministry of Agriculture, however, reports actual yields between 6.58 and 8.35 ton/hectare in the last five years.

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expected, due to the inadequate control of pests and diseases only 50% of the product was of marketable quality. The remaining hot pepper (50%) was not suitable for any market and these factors combined resulted in farmers’ margins and economic results that were below the planned results (Annex 3).

3.1.5 Post-Harvest and logistics

After initial grading at the farmers’ side, hot pepper was delivered for final grading and (bulk) packaging at the warehouse of Alamanda in Tegal. As a result of the post-harvest training and coaching activities the percentage rejected hot pepper at the traders pack house was below 5% during the entire PMC pilot project. In accordance with the contract stipulation this implied that all supplied hot peppers were accepted and paid by PT Alamanda.

From the Alamanda pack house in Tegal onwards, peppers were stored, handled and transported under temperature controlled (cool) conditions by the trader. Alamanda arranged for refrigerated transport from Tegal to their main (export) packaging facility near Bandung where the peppers were packed in consumer packs and labelled, according to the specification of the various supermarkets in Singapore.

3.2 Group formation and development

The farmer group made much progress in becoming a more professional group during the project. At the end of the PMC pilot period the farmer group Mitra Usaha Tani was officially registered at a notary office as an Association and a basic office for the secretariat was established in Guci. A joint bank account of the Association was opened.

All contract issues with the trader, including the extension of the contract after the pilot PMC period, are centrally coordinated by the farmer group. Alamanda transfers money to the cooperative bank account of the Association, instead of paying individual farmers. The management of Mitra Usaha Tani distributes the money among the farmers, according to pepper volumes supplied and the quality of the peppers. Nowadays group members pay a monthly membership fee and the farmer group decided to add an extra levy of IDR 500,= on top of each kg peppers delivered to Alamanda. This levy is used by the farmer group to cover the extra operational costs made by the Association.

By the end of the PMC project farmers were in the process of developing their own marketing strategy, which included plans for contacting other traders and drying part of their peppers to become less depending on the fresh market and its erratic prices. The group currently has the ambition to grow their membership base to become a full fletched co-operative in the future.

The external organizational trainer classified the farmer group at the end of the PMC as having reached “Phase 3: developed” of his maturity ladder (Fig. 5), which is an extraordinary achievement of the farmer group within a short span of time6.

3.3 Marketing and sales

Although hot pepper prices at the Indonesian market fluctuated continuously during the pilot PMC project all partners felt committed to the contract prices that were agreed upon with PT Alamanda.

6 Within the vegIMPACT context a PMC maximally lasts 12 months and within this short time span the farmer group is supported to develop the most essential capacities and skills to make the PMC pilot market linkage sustainable. The development of farmer groups is usually slow and cooperation is fragile during the first years. Commonly, it takes at least three years of regular training sessions and coaching to build a strong farmer group and to develop a basic farmer group into a mature, full-fledged cooperative (Figure 5 and Annex 4).

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As per contract stipulations, Alamanda had the opportunity to temporarily adapt the contract price, after consultation of the farmer group, if the market price would be more than 50% lower than the fixed contract price. This clause was only used once during a two weeks’ period before Idul Fitri (end of the Ramadan) when prices were extremely low and Alamanda reduced the contract price with the consent of farmers with 2,000 IDR/kg.

An overview of hot pepper prices recorded during the PMC pilot period is presented in Table 4.7

Prices (quality classes) Minimum price (IDR / kg) Maximum price (IDR / kg)

Market price peppers (ungraded) 2,500 20,000

Grade A (green), fixed in contract 8,000 10,000

Grade A (red), fixed in contract 10,000 12,000

Table 4. Minimum and maximum pepper prices in IDR per kg recorded during PMC pilot period, April – December, 2013.

The arrangements with regard to the soft loan as agreed between Alamanda and the farmers (Section 2.2.3) sometimes caused problems: on the one hand the trader was sometimes late with paying out the loan due to internal cash flow problems, on the other hand, because of low yields of poor quality hot pepper, the farmers were slow in paying back the received loan.

7 Extremely high market prices of up to IDR 42,000 per kg for red pepper were also recorded during one week,

but these prices are not taken into account.

18


4 Conclusions

4.1 Business proposition PMC hot pepper

The PMC was successful in achieving a continuous, weekly supply of products of agreed quality specifications, but the planned contract volumes were never reached because of lower than expected plant productivities. Certain input costs such as fertilizers and pesticides were reduced as lower volumes were used, but overall the PMC hot pepper was less profitable for farmers as expected.

In Annex 4 an overview is presented of hot pepper production costs and income per hectare before and after PMC interventions. The overall costs of hot pepper production per hectare decreased with 28%, mostly through a reduction in the costs of fertilizer (45%) and pesticide (11%) use.

However, due to the new regime of single-pesticide sprayings, instead of mixing several pesticides in one tank, the labour cost per ha increased due to the increased frequency of spraying. A summary of hot pepper production costs per m2 before and after the PMC is presented in Figure 8.

Figure 8. Summary of total production costs (on the left) and fertilizer and pesticides costs (on the right) in hot pepper production before and after PMC interventions 8.

The planned pepper production per plant was estimated at 800 g/plant, which would result in a total production of about 10.6 ton per hectare at a population of 13,330 pepper plants per hectare (Annex 5). About 70-80% of the harvested product was expected to be of export quality (grade A) and this would have resulted in a profit margin of about IDR 67.9 million per hectare during each planting cycle of 10 months9, taking into account the agreed contract prices and weekly volumes (Annex 5).

However, these contract volumes and planned pepper production levels were never reached by the farmers during the PMC pilot period. The actual planting area in the pilot project was almost 10% smaller than planned and the plant density per hectare was about 25% lower. The main reason however was the much lower yield of marketable hot pepper of only 480 g/plant on average (Annex 5). The low production volumes of poor quality were attributed to adverse weather conditions and heavy incidence of pests and diseases.

As a result the average farmers’ margin (loss) was minus IDR 4.8 million / ha during the PMC pilot period of 10 months as compared with the expected and calculated margin (profit) of IDR 67.9 million / ha.

8 Based on data collected by WP M&E. For the end line research data from only 3 farmers were taken into

account, as harvest at fields of the rest of the other farmers were still ongoing. Therefore these data should be taken as indicative of actual cost. 9 The PMC pilot period consisted of 1 planting round of 19 staggered planting schedules (Annex 2).

19


Due to these financial results (small loss per ha) and the fact that the farmers used the Alamanda loan – intended for hot pepper - as working capital for other crops as well, 28% of the Alamanda loan to the farmers was not paid back to Alamanda at the end of the first planting round. The balance of the trader’s loan – debt of the farmer group to Alamanda - was moved forward to the next pepper production period (beyond the PMC pilot period). Out of 13 participating PMC farmers, only four farmers could fully pay back the loan to Alamanda and realized a positive result at the end of the PMC. Four farmers carried a negative balance forward of more than IDR 10 million to the next planting season

However, the overall financial picture of most farmers was positive, because they used the Alamanda loan also to grow and finance other crops. These other crops were not sold to Alamanda, and income of these crops was not automatically used to pay back the Alamanda loan. The farmers’ profit margins that were realized on those other crops were not taken into account in the PMC analyses, but are an essential part of the total farmers’ household income. Therefore, farmers were motivated to continue the collaboration with Alamanda after the PMC was finished, despite the meagre financial returns from hot pepper.

The participating Guci farmers are continually in need of capital for starting up field production. Compared with a commercial bank loan – if available at all for small farmers – with annual interest rates of up to 20%, an interest free loan from Alamanda in combination with a profitable contract for hot pepper was an attractive proposition for the farmers.

The PMC hot pepper market proposition can be profitable for farmers as well as for traders. Due to extreme weather conditions in Central Java in 2014, the production volumes and quality of the vegIMPACT PMC hot peppers were not representative and have affected the expected financial benefits of participating farmers.

The fact that all participants decided to continue cooperation among themselves and with Alamanda in 2014 and 2015 is a positive outcome and encouraging. The ultimate proof of the commercial sustainability of the PMC proposition on hot pepper might become apparent in the coming years.

4.2 PMC contribution to vegIMPACT objectives

The pilot PMC hot pepper accomplished some tangible improvements on the following aspects:

Strengthening of farmer group as shown by stepping up in the farm group maturity ladder. Reduction of fertilizer and pesticide costs and improved understanding of Integrated Pest

management (IPM) principles by farmers Establishment of continuous weekly supply Introduction of a contract (price) that all partners respected throughout the PMC pilot

period.

20


PMC hot pepper has contributed to the following specific vegIMPACT objectives as follows (Table. 5):

vegIMPACT objective score Remarks

Increased vegetable productivity - Due to extreme weather conditions

Reduced pesticide use per unit product + Despite low production volumes

Reduced fertilizer use per unit product + Despite low production volumes

Reduced production costs per unit product

+ Overall lower cost price

Increased financial margins for farmers 0 Hot pepper was not profitable for most farmers but because the interest-free loan from the trader was used for other crops the overall appraisal is neutral

Reduced occupational health risks + Lower use of pesticides

Explanation: + = PMC positively contributed to specific objective 0 = neutral; no effect of PMC was observed - = PMC did not contribute to specific objective Table 5. Summary of contribution PMC hot pepper to vegIMPACT objectives

4.3 Sustainability

The local Dinas Pertanian (public extension service) in Tegal, during various meetings with the vegIMPACT PMC team and the farmers, has expressed a strong interest in further supporting kelompoktani Mitra Usaha Tani to become a formal cooperative in due course. The farmer group was requested to present a strategic plan and proposal for continued support, whereas the Dinas promised to search for budget and means to support the group in the future. 10

To sustain major achievements of this PMC vegIMPACT will continue to support the farmer group in 2015 by means of the following activities:

Organizing a write shop and help the farmers to develop a three years’ strategic plan to become a full-fledged cooperative and to finalize a sound proposal for (financial) support with the local Dinas Pertanian.

Organizing refresher / coaching days, based on farmers’ priorities, once every 6 month. Regular coaching and advisory activities by telephone by the vegIMPACT senior supply chain

facilitator.

10

Although the Government budget 2015 was already allocated and fixed at the time of the meeting of the farmer group with the Dinas Pertanian Tegal, (September2014), the Director promised to allocate some budget for immediate priorities at the short term in 2015.

21


Annex 1. Introduction Indonesian vegetables exports to Singapore

With its small territory and 7 million citizens Singapore is entirely dependent on imports to fulfil their demand for fruits and vegetables. The total demand for vegetables in Singapore has steadily increased with 27% during the last 10 years, whereas the demand for fruits has declined with 13 %. The fresh fruits and vegetables market in Singapore is very price driven and some traders always buy the cheapest available products, even though products of a higher quality would be available.

The Singaporean government has established a clear and stringent set of rules and regulations for importing fresh food into Singapore. This policy is implemented, monitored and governed by the Agri-food and Veterinary Authority (AVA) of Singapore. In general, fresh fruits and vegetables can be imported from any country as long as the imported products are free from traces of pesticides and other chemical substances or below a specific threshold level, as mentioned on a list of prohibited pesticides. The Ninth Schedule of the Food Regulations Commission as recommended in the Joint FAO/WHO Codex Alimentarius, are leading for the AVA list.

Severe competitors for Indonesian fruits and vegetables at the Singapore market are Malaysia, Thailand and China (all three countries are member of the ASEAN + 3).These countries offer a similar range of products as Indonesia, however for much lower prices and sometimes of a better quality and at better trade conditions. In short, the Indonesian competitive position at the Singapore market is weak and the volume of Indonesian products into Singapore has decreased during the last decade, whereas competitors shares have increased (Figure 10).

22


Figure 7. Import share of selected Indonesian vegetables (in tons and %) as compared with major competitors into Singapore in 2002 and 2011.

The reasons for the declining import volumes of Indonesian vegetables and fruit into Singapore are related to the lower production costs in Malaysia, Thailand and China. Producers from these countries have larger farms, use more advanced production methods and lower costs. Farmers in other ASEAN countries are also better organized and supported by their Governments as compared with in Indonesia. Another important factor determining the weak competitive position of Indonesia is the high logistical costs as compared with other ASEAN countries.

According to the Singaporean Ministry of National Development there is good potential for Indonesia to increase agricultural exports to Singapore and an Indonesia-Singapore Agribusiness Working Group has been installed to look into possible cooperation and implementing practical initiatives such as:

To analyse the cost structure of Indonesian agri-produce to identify bottlenecks for export;

Mapping of production sites, logistics routes and facilities for key Indonesian provinces;

Exchange of information with regard to vegetable varieties preferred by Singapore consumers and the source of seeds for targeted vegetables to increase the yield and productivity of Indonesian produce;

More promotion activities with retailers and fairs to showcase Indonesian agri-produce. The Singapore government seems to encourage traders to cooperate with Indonesia as they do not want Singapore to become too dependent on China, especially because of some recent food scandals with Chinese products.

23


Annex 2. Planting schedule hot pepper Guci, 2013 – 2014

Field production

Harvest period

Cutting plants / end of production period

44 45 46 47 48 49 50 51 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

1 SYAFI'I 0,9 10000 BIOLA TANAMAN UMUR 2 MGG.TNAM TGL 7/11/2013,TNM MGG KE 45

2 TAUHARI DJ 1 8000 BIOLA TANAM MINGGU INI TGL 27/11/2013,TANAM MINGGU KE 47

3 TORO 0,7 8000 BIOLA PENGOLAHAN LAHAN/BUAT BEDENGAN,TNM MINGGU KE 52

4 SUGENG 0,5 5000 BIOLA PENGOLAHAN LAHAN/BUAT BEDENGAN,TNM MINGGU KE 52

5 LUKMAN 0,17 4000 BIOLA PENGOLAHAN LAHAN MULAI TGL 30/11/2013,TNM MGG KE 1

6 TAUHARI BM 0,5 7000 BIOLA PENGOLAHAN LAHAN MULAI TGL 2/12/2013,TNM MGG KE 1

7 A.RIFAI 1 12000 BIOLA PENGOLAHAN LAHAN PMBERIAN PUPUK KANDANG,TNM MGG KE 4

8 SUGIANTO 0,5 10000 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMAN,TNM MGG KE 4

9 NURKHOLIS 0,25 3000 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMANTNM MGG KE 5

10 SYAFI'I 1 10000 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMAN,TNM MGG KE 5

11 ABD.FATAH 0,5 9000 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMAN,TANAM MINGGU KE 6

12 NURKHOLIS TW 0,8 12000 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMAN,TANAM MINGGU KE 6

13 HAERUDIN 0,75 12000 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMAN,TNM MGG KE 8

14 SUS 0,5 7500 BIOLA PERSIAPAN LAHAN MASIH ADA BEKAS TANAMAN,TNM MINGGU KE 8

15 LUKMAN 0,15 3000 BIOLA PERSIAPAN LAHAN/MSIH ADA TANAMANNYA,TNM MGG KE 8

16 SLAMET T. 0,2 3500 BIOLA PERSIAPAN LAHAN/MSIH ADA TANAMANNYA,TNM MGG KE 10

17 NURKOLIS 0,25 2500 BIOLA PERSIAPAN LAHAN/MSIH ADA TANAMANNYA,TANAM MGG KE 1O

18 DIBYO 0,17 3000 BIOLA PERSIAPAN LAHAN/MSIH ADA TANAMANNYA,TANAM MGG KE 12

19 EDI SISWOYO 0,4 7000 BIOLA PERSIAPAN LAHAN . TANAM MINGGU KE 12

10,24 136500

VARIETASAGUSTUS

KETERANGAN

JADWAL MINGGU KE-

Planned planting schedule first round 2013-2014

OKTOBER DESEMBER

NOVEMBER JANUARI MARET MEY JULI SEPTEMBER

DESEMBER FEBRUARI APRIL JUNINO NAMA LUAS/Ha POPULASI

N0VEMBER

44 45 46 47 48 49 50 51 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

1 SYAFI'I 0,9 DUKU AREN 10000 6000 BIOLA

2 TAKHURI 1,0 SIGEDONG 8000 8000 BIOLA

3 SUGENG 0,5 KR.ANYAR 5000 2500 BIOLA

4 LUKMAN 0,2 BATU MIRAH 3800 3500 BIOLA

5 U.TAKHURI 0,5 BATU MIRAH 4000 3000 BIOLA

6 TORO 0,7 CINTAMANIK 8000 2000 BIOLA

7 SUS 0,5 DUKU AREN 7500 7500 BIOLA

8 EDI SISWOYO 0,4 DUKU AREN 7000 7000 BIOLA

9 NURKHOLIS 0,3 SUMBAGA 3000 3000 BIOLA

10 SUGIANTO 0,5 CINTAMANIK 10000 7000 BIOLA

11 SYAFI'I 0,9 DUKU AREN 10000 10000 BIOLA

12 LUKMAN 0,2 BATU MIRAH 3000 3000 BIOLA

13 SLAMET T. 0,2 BEGAWAT 3500 3500 BIOLA

14 TAKHURI 0,8 SIGEDONG 8000 8000 OSAKA

15 ABD.FATAH 0,5 SUMBAGA 9000 9000 BIOLA

16 NURKOLIS 0,3 SUMBAGA 2500 2500 BIOLA

17 NUR KHOLIS TW 0,8 MOGA 3000 0 BIOLA

18 TORO 0,5 CINTAMANIK 8000 8000 BIOLA

TOTAL 9,42 113300 93500

PANEN MERAH 77 89 260 285 265 269 276 283 515 763 712 656 1029 793 602 555 568 711 716 656 431

PANEN HIJAU 90 90 55 64 65 126 163 162 118 153 152 202 198 694 177 156

Real planting schedule 2013-2014

NO NAMA LUAS/Ha LOKASI POPULASI SISA VARIETAS

JADWAL MINGGU KE-

OKTOBER DESEMBER

NOVEMBER JANUARI MARET MEY JULI SEPTEMBER N0VEMBER

DESEMBER FEBRUARI APRIL JUNI AGUSTUS

24

vegIMPACT report XX. Evaluation PMC hot pepper

Annex 3. Break down planned product flows, planting shedules and yields

(project planning against actual realization)

Deviation in planting schedule

Planned production flows

Realized production flows

25


Realized production flows

26


Annex 4 Three years’ development path of farmer group

(from basic farm group to full-fledged cooperative)

KERANGKA KERJA CAPACITY BUILDING KELOMPOK TANI

PEMETAAN SUBTANSI

Pemetaan

Pemahaman Tujuan Kelompok

Permasalahan, potensi dan kebutuhan

berorganisasi

Pemetaan

Pengurus dan Mekanisme Kerja

Pola Pengambilan Keputusan, tata

aturan dan kepemimpinan

Pemetaan

Administrasi dan Keuangan

Teknis administrasi keuangan serta Transparansi & akuntabilitas

Pemetaan Kegiatan

dan Layanan

Pengelolaan kegiatan & Layanan

serta kemanfaatannya

ASISTENSI DAN PENDAMPINGAN

POSISI TAHAP

PERKEMBANGAN KELOMPOK:

1. Perintisan

2. Penataan (tumbuh)

3. Pengembangan

4. Pemandirian

PRA-KOPERASI

PRODUSEN

KOPERASI

PRODUSEN

TRAINING:

1. Dasar2 Kelompok

2. Administrasi Kelompok

3. Manajemen Kelompok

4. Kepemimpinan

5. Manajemen kegiatan &

layanan

6. dll

TRAINING:

1. Dasar2 Perkoperasian

2. Manajemen Koperasi

3. Manajemen Finansial

4. Perencanaan Bisnis

5. Manajemen Pemasaran

6. dll

FRAMEWORK FOR CAPACITY BUILDING OF FARMER GROUPS

MAPPING SUBSTANCE

Mapping the

understanding of group’s objectives

Problems, the potential and organizational

needs

Mapping the

administrators and work mechanism

Decision-making pattern, rules and

leadership

Mapping the finance and

administration

Technical financial administration and transparency and

accountability

Mapping services

and activities

Management of activities and

services as well as the emergence

ASSISTANCE AND MENTORING

THE GROUP STAGE OF

DEVELOPMENT POSITION:

1. Pioneering

2. Structuring (grow)

3. Development

4. Independent

PRODUCER

PRE-

COOPERATIVE

PRODUCER

COOPERATIVE

TRAINING:

1. Group’s fundamentals

2. Group’s administration

3. Group’s management

4. Leadership

5. Management of activities &

services

6. etc

TRAINING:

1. Group’s Cooperative

2. Management of Cooperative

3. Financial Management

4. Business Plan

5. Marketing Management

6. etc

27


Annex 5. Key performance data PMC hot pepper

Key performance data of PMC hot pepper and the deviation between project planning and actual realization (based on data of PT Alamanda, field observations and focus group discussion).

Overal project Planned Real

Total number of plants 136,500 93,500

Total planting area (ha) 10.24 9.42

Number of plants per hectare 13,330 9,926

Yield per plant (gram) 800 961

Total production all grades (kg/ha) 10,664 9,538

Marketable (sellable) production 100% 50%

Marketable yield per plant (gram) 800 480

Yield marketable products all grades (kg/ha) 10,664 4,769

% grade A 75% 65%

Production grade A / hectare (kg) 7,998 1550

Production grade B / hectare (kg) 2,666 835

Production off grade / hectare 0 2,384

Total supply grade A red to Alamanda (kg) 11,995

Total supply grade A green to Alamanda (kg) 2,605

Supply grade A red to Alamanda per hectare (kg) 5,327 1,273

Supply grade A green to Alamanda per hectare (kg) 2,663 277

Contract price red (IDR/kg) 12,000Rp 12,000Rp

Contract price green (IDR/kg) 10,000Rp 10,000Rp

Average price grade B (red and green) (IDR/kg) 6,000Rp 6,000Rp

Average price off grade (only in periods of price peaks) (IDR/kg) -Rp 5,000Rp

Total cost per planting round (IDR/ha) 38,597,740Rp 27,887,620Rp

Farmers' gross income grade A red* (IDR/ha) 63,920,391Rp 15,280,255Rp

Farmers' gross income grade A green (IDR/ha) 26,633,496Rp 2,765,393Rp

Farmers' gross income grade B (IDR/ha) 15,996,094Rp 5,007,349Rp

Farmers's gross income off grade product* (IDR/ha) 2,980,565Rp

Total gross farmers' income all grades (IDR/ha) 106,549,980Rp 23,052,997Rp

Farmers' margin (IDR/ha) 67,952,240Rp (4,834,623)Rp

Notes and assumptions

* for the calculated/expected maximum profit margin 66% grade A red 34% grade A green was used

* contract volume was 1,000 kg /red and 500 kg/green per week

* staggered planting schedule, every farmers would be enganged about 10 months

* of harvest only 50% was of marketable quality, of which 65% was grade A and supplied to Alamanda

* only when market prices where very high the 50% offgrade could be sold for 25% of the standard market price

* peak market prices were on average IDR 20,000. Assumption 25% of off grade could be sold during peak periods

* 11% less hectares was used than expected

* in reality only 113,300 plants planted of which roughly 20% died plants due to pest & deseases & adverse weather conditions

* cost prize based on data Work package Monitoring & Evaluation

Documents

Product Market Combinations for small farmers in Indonesia ... · Downstream in the supply chain PT Alamanda already had contacts with some major supermarket chains in Singapore who